Up Up and Away for the US Dollar Breakout

Aug 20, 2014: 2:24 PM CST

With stocks breaking out, it may be a surprise that the US Dollar Index is also breaking through resistance.

Let’s take a look at the Dollar Breakout and highlight target levels and points to watch:

The Dollar formed a “Rounded Reversal” pattern with divergences into the $79.500 level (as seen on the @DX Continuous Contract).

Price broke to a new swing high in June to form a higher low – the first two steps in a Trend Reversal – ahead of July’s breakout.

Now, we see a resistance breakthrough above the $81.750 level which continues a three-day movement of bullish strength.

In sum, the Dollar may be poised for even higher prices into the “Open Air” territory.

What targets might Dollar traders assume could be achieved?  Let’s focus on a Fibonacci Grid:

A quick glance at the Daily Fibonacci Retracement Grid shows a dual price target into the 82.60 index level.

The confluence develops from the September 2013 swing high along with the 61.8% Fibonacci Retracement.

Note that yesterday’s breakout took price into the 82.00 Fibonacci Target while today’s breakout above 82.00’s resistance sets in motion a target play for (at least) 82.60.

For the moment, the Dollar has developed – and confirmed – a short-term Trend Reversal with the progression of higher highs and higher lows off a clearly divergent support level (Double Bottom).

The strength in the Dollar – amid all the global uncertainty – bends the traditionally inverse Cross-Market Relationship between stocks and the Dollar.

Nevertheless, monitor these two markets closely along with the potential target – and open air break – above 82.60.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

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3 Responses to “Up Up and Away for the US Dollar Breakout”

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